The San Diego City Council voted unanimously but reluctantly Monday to send $69.8 million in redevelopment funds to the state, even as a lawsuit was filed to challenge the legislation requiring cities to turn over those monies.

“We really have no choice but to do this tonight,” said Councilwoman Marti Emerald. “We’re all in it here together. We have to go along with the (staff) recommendation because it’s the only way to keep our options open.

The money is required under state laws passed in June if cities voluntarily decide to keep redevelopment agencies. If they vote to disband those agencies, then redevelopment funds go back to city, county, school and special district general funds.

Under the second scenario, San Diego actually could lose $3.5 million a year because redevelopment funds would no longer be available to cover such items as bond payments for Petco Park and the San Diego Convention Center. Money for affordable housing projects, covered by 20 percent of redevelopment funds, also would evaporate.

The payment option to Sacramento, which is what San Diego opted to do, represents about 40 percent of each agency’s income this year and 10 percent in future years. The exact amount won’t be known until Aug. 1.

Meanwhile, California cities filed a lawsuit Monday against the state to overturn the two bills passed in June. Overall, the state hopes to get $1.7 billion this year and $400 million or more annually hereafter.

The action by the League of California Cities, California Redevelopment Association and the cities of San Jose and Union City was filed with the California Supreme Court on an expedited basis, officials said, because local redevelopment agencies have until Sept. 1 to decide whether to disband or pay the state what is requested.

San Diego Mayor Jerry Sanders, joined by the mayors of Imperial Beach, La Mesa and National City, announced their support of the suit, some calling the state’s action “extortion.”

“These bills are unconstitutional, plain and simple,” Sanders said. “We’re confident the courts will find these bills illegal and stop them in their tracks.”

The governor and legislators argued that the state’s priorities preclude keeping redevelopment in business as it has been operated for more than 60 years. Previous policy required the state to make up the loss of funds to schools from the diversion of redevelopment funds to community revitalization and economic development.

In addition, the state legislative analyst and other critics have said it is not clear that redevelopment generates the economic benefits its backers cite.

“The word ‘voluntary’ is the most hilarious term I’ve heard for this in several weeks and months,” said Councilman Kevin Faulconer, who represents downtown, where about $47 million is projected to be lost to the state.

The council plans to take final action Aug. 1 and between now and October hold meetings with neighborhoods in the city’s 17 project areas to determine which projects should be delayed if not cancelled.

Jay Goldstone, the city’s chief operating officer, called the council action “very sad and disappointing,” because of the hit to redevelopment projects the payments — which he called a “ransom” — will produce.

However, some members of the public said in opposition that some reforms should be tied to the council action.

Councilman Todd Gloria replied that his ad hoc committee on redevelopment continues to work on reforms and recommendations will come later.

Councilwoman Sherri Lightner joined her colleagues on the main resolutions, but voted no on one measure that would tap some of the affordable housing funds in North Park and downtown to make the state payments. The council added language that will require those funds to be paid back by 2015 once the state payments drop back.

Jerry Groomes, president of Southeastern Economic Development Corp., for neighborhoods southeast of downtown, said the state payments will leave him with few funds to revitalize his low-income neighborhoods.

“This clearly couldn’t come at a worse time for us as we try to build more resources and do more things,” Groomes said.

Staff from the Centre City Development Corp., which oversees downtown, said various projects, such as parks, fire stations and various street improvements will be delayed.

(This is the earlier version:)

California cities sued the state Monday to save redevelopment and keep $1.7 billion from being shifted to Sacramento to help balance its budget.

The action by the League of California Cities, California Redevelopment Association and the cities of San Jose and Union City was filed with the California Supreme Court on an expedited basis, officials said, because local redevelopment agencies have until Sept. 1 to decide whether to disband or pay the state what is requested.

San Diego Mayor Jerry Sanders, joined by the mayors of Imperial Beach, La Mesa and National City, earlier announced their support of the suit, some calling the state's action "extortion." Also in attendance were San Diego Councilman Kevin Faulconer, who represents downtown, where the region's largest redevelopment efforts continue, and Kris Michell, president of the Downtown San Diego Partnership business group.

"These bills are unconstitutional, plain and simple," Sanders said. "We're confident the courts will find these bills illegal and stop them in their tracks."

In its budget deliberations, the Legislature, at Gov. Jerry Brown's urging, passed two bills, one to dissolve the state's roughly 400 redevelopment agencies, and the other, to allow them to remain in business, but only if they give up about 40 percent of this year's property tax receipts estimated at $1.7 billion, and about 10 percent or $400 million annually thereafter.

San Diego would be on the hook for nearly $70 million this year and $16 million annually in the future.

The governor and legislators argued that the state's priorities preclude keeping redevelopment in business as it has been operated for more than 60 years. Previous policy required the state to make up the loss of funds to schools from the diversion of redevelopment funds to community revitalization and economic development.

In addition, the state legislative analyst and other critics have said it is not clear that redevelopment generates the economic benefits its backers cite.

But as Faulconer said, the loss of redevelopment takes away one of the few tools localities have to eliminate blight and promote affordable housing.

"Make no mistake about it," Faulconer said, "the funds that the state is forcing our cities to divert to state purposes are funds that would build stronger, better, more vibrant neighborhoods."

National City Mayor Ron Morrison said his current redevelopment projects would generate 1,350 construction and permanent jobs.

"Jessie James used a gun when he robbed people," Morrison said. "This is a gun aimed at the head of every one of our communities."

Steve Mayer, lead attorney in the lawsuit, said the cities are asking the Supreme Court to suspend the two redevelopment laws by Aug. 15 and to rule on the merits of the case by Dec. 20.

The laws require redevelopment agencies to be dissolved by Oct. 1 or, if they remain, to pay the state 50 percent of the funds due by Jan. 15.

"If they don't take the case, we will file somewhere else," he said.

The laws also say that if the cities win in court, then the redevelopment agencies would be barred from issuing new bonds or taking other steps to implement plans -- in effect, eliminating redevelopment programs.

"It's unconstitutional in its own right," he said of these so-called "poison pills."

State finance department spokesman H.D. Palmer replied, “We’re confident that this measure – which was passed by the Legislature and signed by the governor – is legally sound."

"Redevelopment agencies were created by an act of the Legislature in 1945, and they can similarly be dissolved by an act of the Legislature," he said. "We cannot afford to be spending more than a billion dollars a year on local redevelopment projects at a time when our core services – including education and public safety – are being cut.”

Chris McKenzie, executive director of the League of California Cities, said the state's action "blatantly ignored the voters and violated the state constitution," a reference the last year's voter approval of Proposition 22 designed to prevent the state from taking local revenues for state budget purposes.

But Palmer said the proposition does not protect redevelopment agencies from being disbanded and does not require the redevelopment payments to come only from redevelopment funds -- largely property taxes from redevelopment project areas. The payments could come from other sources, he said.

Senate president Pro Tem Darrell Steinberg, a Sacramento Democrat, called the Legislature's actions legal and that they "balance redevelopment with other public priorities including education."

"Redevelopment agencies keep 93 percent of their money going forward," Steinberg said. "This is not the agencies' money, nor the state's - it is the taxpayers'."

Lawmakers chose to reform redevelopment rather than eliminate it, said Assemblyman Bob Blumenfield, the Sherman Oaks Democrat who is chairman of the Assembly Budget Committee, which developed the bills.

"We acted in consultation with our attorneys who concluded that these reforms are constitutional," he said. "Because of these reforms, redevelopment still exists."